COVER STORY
At the Epicenter:
Where the Financial System Meets the Real Economy
Cover Story Interview for International Finance Magazine on November 28, 2008.
Mr. Ron Nechemia is the Chairman of the Board of
Directors for EurOrient Financial Group, a private sector
global development financial institution that is accredited
by the United Nations General Assembly on Financing
for Development. In May 2008, Mr. Nechemia was
interviewed by International Finance Magazine regarding
his outlook for the global economy and the world’s
financial systems. During this interview, he announced
that he saw a systemic financial crisis brewing and warned
that in the months to come the United States was likely
to face a once-in-a-lifetime financial crisis, an oil shock,
sharply declining consumer confidence and, ultimately,
a deep recession. Mr. Nechemia’s forecast included
a bleak sequence of events: Homeowners defaulting
on mortgages, trillions of dollars of mortgage-backed
securities unraveling worldwide and the global financial
system shuddering to a halt. These developments,
he foretold, could cripple or destroy hedge funds,
investment banks and other major financial institutions
like Fannie Mae and Freddie Mac. While some viewed
his comments to be overly pessimistic at the time, Mr.
Nechemia’s predictions proved accurate in less than half
a year.
In fact, Mr. Nechemia has a strong record of correctly
analyzing market data and predicting economic events.
8 ¦ 2009 FEBRUARY
On November 5, 2007, in a special interview to Viet
Nam Television, he warned that Viet Nam was likely to
face economic deterioration and challenges to maintain
control of the stock market in the face of the boom in
share prices. He further posited that a sudden reversal
and capital outflows would jolt the economy while the
supply of securities has been increasing; demand has
been even stronger, given limited outlets for savings.
In this case, Mr. Nechemia’s predictions were also
stunningly accurate and these events did occur six
months later.
As we enter 2009, global financial institutions and
markets have been badly shaken. Threats to systemic
stability became manifest in September 2008 with the
collapse or near-collapse of several key institutions. The
far-reaching nature of the events that are unfolding is
illustrated by the fact that within a period of only one week,
large stand-alone investment banks disappeared from
the U.S. financial landscape. It is against this challenging
and still evolving backdrop that International Finance
Magazine gave Mr. Nechemia a second interview to ask
him his view on recent events in the financial systems
and to suggest potential policy measures that could be
helpful in the present global economic climate.

IFM: Mr. Nechemia, can you de-
scribe the current global financial
and economic situation?
Mr. Nechemia: The world economy
is facing its most difficult situation
in years, against the backdrop of a
deepening fi nancial crisis that origi-
nated in mature markets. Advanced
economies are slowing markedly and
some are already in recession. The
continued strained fi nancial condi-
tions will dampen global growth
prospects.
Although developing countries as
a group have so far been relatively
resilient in the face of the present
shocks on account of solid funda-
mentals and sound policies, coupled
with fi nancial buffers built-up over
recent years, most emerging markets
and developing economies are not
immune to the spillovers of the ongo-
ing global fi nancial crisis, with some
countries more affected than others.
I am greatly concerned about fi nan-
cial contagion spreading to several
emerging market economies in the
form of reversals in capital inflows,
increased funding costs, and shifts
in investor sentiment unrelated to
fundamentals.
Considering that preventing mac-
roeconomic volatility from fi nancial
spillovers and sustaining continuous
growth are key priorities for devel-
oping countries, greater flexibility
is needed with regard to fiscal and
monetary policies in the short-run to
soften the impact of these external
shocks on their economies as coun-
try circumstances warrant, while
reaffi rming their continued commit-
ment to prudent policies. Moreover,
I stress that the balance of risks in
many countries is shifting as infla-
tion risks have begun to recede and
downside risks to growth have inten-
sified.
IFM: What are the strains
afflicting the global financial sys-
tem at the present time?
Mr. Nechemia: The strains af-
fl icting the global fi nancial system
are expected to deepen the downturn
in global growth and restrain the re-
covery. Moreover, the risk of a more
severe adverse feedback loop between
the fi nancial system and the broader
economy represents a critical threat.
The combination of mounting losses,
falling asset prices, and a deepen-
ing economic downturn, has caused
serious doubts about the viability
of a widening swath of the fi nancial
system. The ongoing deleveraging
process outlined in my interview
in May 2008 with International Fi-
nance Magazine has accelerated and
become disorderly—marked by a
rapid decline in fi nancial institutions’
share prices, higher costs of funding
and credit default protection, and de-
pressed asset prices. One result has
been sudden failures of institutions
as markets have become unwilling
(or unable) to provide capital and
funding or absorb assets.
In particular, the supply of credit is
expected to contract markedly, plac-
ing a drag on economic growth not
just in the United States, but in other
advanced and emerging economies.
Global inflation risks have moderated
on the back of sharp declines in com-
modity prices from mid-year highs.
However, the volatility of inflation
expectations, particularly in emerg-
ing markets, is challenging monetary
authorities in an environment of
slowing growth, and may hamper
their ability to respond to potential
fi nancial stability concerns.
IFM: In the face of all of these
considerations, what can or
should be done to mitigate econom-
ic risks to developing countries as
well as in advanced economies?
Mr. Nechemia: What we need is
comprehensive response to address
the strains in fi nancial markets
and restore market confidence. I
considered it essential to address
the deep-rooted weaknesses in risk
management and regulation in ad-
vanced countries’ fi nancial sectors
that led to excessive risk-taking and
speculation. In this connection, we
shall underscore the need for funda-
mental reform of the regulatory and
supervisory framework as well as
clearer accounting rules and trans-
parency.
In order to help reduce developing
countries’ vulnerability to crises,
International Financing
including from contagion, I advise
moving expeditiously to put in place
new fi nancial instruments and
mechanism to help prevent or deal
with crises. The introductions of
new types of liquidity facilities are
long overdue. I am calling on the in-
ternational fi nancial institutions to
establish new liquidity instruments
in order to adequately meet the needs
of developing countries as well as for
a substantial increase in the level of
access to resources.
IFM: What lead global economy
to this global financial crisis?
Mr. Nechemia: The crisis is the
result of three failures: A regulatory
and supervisory failure in advanced
economies; a failure in risk man-
agement in the private fi nancial
institutions; and also a failure in
market discipline mechanism. Mar-
ket discipline mechanism requisites
should including the three general
requirements for fi nding an accept-
able level of market discipline: (1) a
market in the fi nancial instruments
of the issuer; (2) enforceable credit
contracts; and (3) a market for cor-
porate control.
IFM: Where do you think that
reform shoud be considered or is
needed?
Mr. Nechemia: Let us also look
at the issue of reform. Reform is not
only for developing countries. All the
countries of the world need to reform
and the reform needs to be in depth.
Because, as we have seen in recent
years and realized that this system
that is some 60 years old is no longer
working, and so we can’t reform us-
ing old instruments. We have to come
up with appropriate instruments to
deal with this crisis and the new
situation facing us.
The global fi nancial architecture is
now showing its cracks, showing its
weaknesses, and therefore, we really
have to take a very in-depth approach
to reform. We need a new fi nancial
order to deal with this situation. The
effects are extremely serious, not only
for developed countries, but also for
developing countries.
2009 FEBRUARY ¦ 9
 COVER STORY
On March 19, 2002, at the Inter-
national Summit on Financing for
Development held in Monterrey, Mex-
ico, I delivered a speech on this very
issue, the issue of reform as I saw the
need then. The need applies today,
but the message today is even more
important than it was in the begin-
ning of the new Millennium.
This fi rst United Nations-hosted
summit to address key fi nancial
and development issues attracted 50
Heads of State or Government. In ad-
dition to a number of Presidents and
Prime Ministers, over 200 ministers
participated in the Summit, includ-
ing ministers of fi nance, trade and
foreign affairs; the United Nations
Secretary-General; the heads of the
World Bank, International Monetary
Fund and World Trade Organization;
the representatives of civil society
and the leaders from the private sec-
tor. Senior officials of all the major
intergovernmental fi nancial, trade,
economic, and monetary organiza-
tions were present.
In my address to the Monter-
rey Summit seven years ago, I
emphasized the need for ‘coherence,’
particularly between national and
international responsibilities. Lack
of concerted action to bring the
benefits of development to the vast
majority of humanity that lives in the
developing world would only increase
the `ravages of poverty.’ I warned the
respected audience that the road to
development is an arduous one and
the decisions facing the developing
countries and the international com-
munity will be increasingly difficult.
Finally, I stressed that our actions
in the area of fi nancing for develop-
ment are perhaps unique in that they
directly affect the lives and security
of billions of less fortunate human
beings around the world.
I pointed out in the Summit the need
to focus, above all things, on coher-
ence and on fi nding better ways of
dealing with the increasing frequen-
cy, intensity and destructive power of
fi nancial and monetary crises, such
as, but not limited to, the Asian Fi-
nancial Crisis (1997 – 1999) and in
Argentina (1999 - 2002), showing
that this is a systemic problem that
can only be solved through coherence
10 ¦ 2009 FEBRUARY
among trade, fi nance, and monetary
policies, coherence between short-
term and long-term development
policy objectives, coherence between
the national and international re-
sponsibilities, the regional and the
interregional cooperation, the gov-
ernmental and the intergovernmental
spheres.
The increasingly interdependent
world economy requires a holistic
approach to the interconnected na-
tional, international, and systemic
challenges of fi nancing for develop-
ment. In addressing these challenges,
we reaffi rm their importance.
I have a great concern that a number
of developing countries have become
more vulnerable, in the course of
liberalizing their external economic
and fi nancial regimes, to the volatile
fluctuations of private capital flows
in international fi nancial markets. I
stress the importance at the national
level in the countries concerned of a
favorable climate for private fi nancial
flows, sound macroeconomic policies
and appropriate functioning mar-
kets.
We recognize that where techno-
logical change has revolutionized the
way business is done and reduced
the costs and increased the speed of
international fi nancial transactions
The Chairman of the EurOrient Financial Group, Mr. Ron Nechemia addressing the
UNCTAD-ICC Investment Advisory Council, June 14th, São Paulo - Brazil
and that, as policy liberalization has
facilitated international capital flows,
fi nancial institutions have increas-
ingly added emerging market assets
as part of their portfolios, paving
the way towards the phenomenon of
global fi nancial integration.
Global fi nancial integration presents
new challenges and opportunities
for the international community.
It should constitute a very impor-
tant element, as in order for us to
meet the Millennium Development
Goals it is imperative to signifi-
cantly increase the size of overseas
development assistant flows. This
is especially important for the least
developed countries, most of which
do not have access to international
fi nancial markets and do not even
constitute a systemic risk as they are
totally marginalised from the system.
Appropriate policies are important,
not only to help attract private flows
to a greater number of developing
countries, but also to maximize their
contribution to development.
I emphasize the need to explore ways
to broaden cooperation and, where
appropriate, coordination of macro-
economic policy among interested
countries, monetary and fi nancial
authorities, and institutions. We
want to enhance preventive consul-
tation arrangements between such

institutions as a means of promot-
ing a stable international fi nancial
environment conducive to economic
growth, particularly of developing
countries, taking into account the
needs of developing countries as well
as situations that may have a signifi-
cant impact upon the international
fi nancial system.
We need to seek development so-
lutions that go beyond the trade
liberalization, as trade liberalization
is not an ends in itself, but a means
to more sustainable, equitable, and
democratic growth. Now a day, de-
velopment policies focus on price
stability, rather than growth and the
stability of output. Given the current
situation we fi nd ourselves in, it’s
clear that we failed to recognize that
strengthening fi nancial institutions
is every bit as important to economic
stability as controlling budget defi-
cits and increasing the money supply.
We focused on privatization, but paid
too little attention to the institutional
infrastructure that is required to
make markets work, and especially
to the importance of competition.
IFM: Where do you think the
global financial system can and
should improve?
Mr. Nechemia: Looking beyond
the immediate challenges, the crisis
has made clear that new thinking
and action are needed in at least
three areas related to the global
fi nancial architecture. First, the
design of fi nancial regulation needs
to be improved. Second, a better way
of assessing systemic risk must be
found. Third, the mechanisms for
more effective, coordinated actions
are needed to reduce the risk of cri-
ses and to address them when they
occur.
This crisis has shown the limits of
the current regulatory and supervi-
sory frameworks at both the domestic
and international levels. Open fi nan-
cial markets can provide tremendous
benefits by lowering the cost of
capital, but more effective regulation
is needed to realize this potential.
As has been demonstrated all too
graphically, fi nancial innovation and
integration have increased the speed
and extent to which shocks are being
transmitted across asset classes and
economies. However, regulation and
supervision remain geared at indi-
vidual fi nancial institutions and do
not adequately consider the systemic
and international implications of do-
mestic institutions’ actions. Moreover,
macro-prudential tools do not suf-
ficiently take into account business
and fi nancial cycles, which has led
to an excessive buildup of leverage.
The challenge, therefore, is to de-
sign new rules and institutions that
reduce systemic risks, improve fi-
nancial intermediation, and properly
adjust the perimeter of regulation
and supervision, without imposing
unnecessary burdens.
IFM: What is the significant
outcome of the G-20 Summit on
Financial Markets and the World
Economy in Washington, D.C.,
held on November 14- 15, 2008?
Mr. Nechemia: The G-20 Summit
on Financial Markets and the World
Economy demonstrated the increas-
ingly powerful agreement in favor of
broad action in order to confront the
daunting and in many ways unprec-
edented challenges of the current
crisis. By any standards, the Sum-
mit laid out an ambitious agenda.
The G-20 Summit was significant
because of the people present. As
an outcome of the meeting, a new
world economic order is develop-
ing that is more dynamic and more
inclusive than any that we have yet
seen. The most important outcome
of this G-20 meeting is agreement on
an action plan and the commitment
of all participants to implement the
plan vigorously and fully; and the
commitment to act together to meet
global macroeconomic challenges,
using both monetary and fiscal
policy.
I am very pleased about the G-20 lead-
ers’ strong support for the important
role of the International fi nancial in-
stitutions (IFIs) in crisis management
and the reform of the international
fi nancial architecture. In addition,
International Financing
the commitment that was made to
helping countries that are facing dif-
ficult circumstances with rapid and
effective support, the availability of a
new short-term liquidity facility and
other instruments and other facili-
ties are of significant importance.
IFM: The economic stimulus
packages: Will it work, and for
whom?
Mr. Nechemia: I welcome the
emphasis on fiscal stimulus, which
I believe is now essential to restore
global growth. If coordinated, each
country’s fiscal stimulus can be
twice as effective in raising domestic
output growth if its major trading
partners also have a stimulus pack-
age.
How will this fi nancial crisis affect
China’s economic growth in the
coming years? Could you possibly
comment on China’s participation in
the world action against this fi nan-
cial turmoil?
IFM: How will this financial
crisis affect China’s economic
growth in the coming years? Could
you possibly comment on China’s
participation in the world action
against this financial turmoil?
Mr. Nechemia: I reemphasize,
there is no part of the world that is
immune and it would be very sur-
prising if a power like China was
observing the crisis without being in
any way concerned.
Of course, when growth in China
decreases from 11 percent to 6 per-
cent or maybe 5 percent in 2009, it
is a five to six -point decrease. It is a
lot. On the other hand, 6 percent of
growth is also a lot. So, China will be
impacted by the crisis and its growth
will slow. Nevertheless, the rate of
growth will remain higher than other
developing countries.
I think it is a good opportunity for
the Chinese government to rebal-
ance growth from trade-led growth
to a more domestic consumption-led
2009 FEBRUARY ¦ 11
 COVER STORY
growth, which is what I am recom-
mending. It will also have good
consequences on the exchange rate.
China’s contribution to the resolu-
tion of the crisis, at least as growth
is concerned, is mainly linked to its
capacity to shift the main driver for
growth from external demand to do-
mestic demand.
IFM: You mentioned China’s
stimulus plan. Given that there is
some debate about how much of
China’s stimulus package is really
new spending, do you think China
needs to consider more stimulus?
Mr. Nechemia: I think China
defi nitely has room for more stimu-
lus. The government announced this
initial stimulus package, and they
could potentially announce another
one later on. We will see more clarity
around that when China announces
the budget for next year, which will
be around March. But there has al-
ready been discussion within China
about further stimulus, including
some measures to stimulate private
consumption. I think China defi nitely
has the room for that and, should
the downside scenario that I imagine
evolve, that’s something they defi-
nitely should look at.
IFM: Who should lead the fi-
nance of the fiscal expansion that
is necessary as a fiscal stimulus?
Mr. Nechemia: We should recog-
nize that some countries have more
room to maneuver than others. Those
countries—advanced and emerging
economies—with the strongest fiscal
policy frameworks and with the abil-
ity to fi nance fiscal expansion, and
the most clearly sustainable debt
should take the lead. This includes,
but is not limited to, Japan and to
China in Asia.
IFM: What are the deepening
global challenges and policy re-
sponses?
Mr. Nechemia: Let me begin with the
challenges confronting the global
economy more generally. As I have
12 ¦ 2009 FEBRUARY
noted, global growth prospects have
deteriorated sharply. At the EurOri-
ent Financial Group, we now project
that the world economy will grow by
a maximum of two percent next year,
and that advanced economies will
contract by at least a quarter per-
cent over the same period. Growth
prospects for many fast-growing
emerging economies have also been
undermined by the sharp declines in
commodity prices and their demand.
We now anticipate that emerging
economies will expand by five percent
in 2009, although with considerable
regional variation and significant
downside risks. Thus, a priority for
many emerging market economies
will be to take actions that bolster
confidence in their policies while
strengthening the social safety nets.
Around the world, the policy re-
sponses to unfolding global economic
challenges have been varied. Ad-
vanced countries have actively sought
to address underlying weaknesses
through the use of public balance
sheets to recapitalize fi nancial in-
stitutions, provide comprehensive
government guarantees, and extend
liquidity provisions. Monetary and
fiscal initiatives to help support glob-
al demand are also being pursued.
Indeed, with inflation receding, cen-
tral banks in advanced and emerging
market countries have also taken
steps to ease monetary policy.
EurOrient Delegation lead by Ron Nechemia meets with His Excellency the Prime Minister
Hun Sen and the Supreme Economic Council, Royal Government of Cambodia on April 24, 2002
While macroeconomic policies are
crucial to sustaining demand, emerg-
ing economies face an additional
challenge. That is, to ensure that the
unfolding liquidity squeeze does not
transform into a solvency crisis. In-
deed, deleveraging is now impacting
emerging market countries in general,
including those with relatively strong
fundamentals. Some countries with
liquid domestic fi nancial markets,
which previously received large capi-
tal inflows, have experienced abrupt
reversals of external fi nancing flows.
Past experience suggests that ex-
change rate adjustment can help
absorb some of the pressures aris-
ing from external current account
weakening and capital outflows. At
the same time, comfortable reserve
buffers help ensure the availability of
foreign currency liquidity if countries
remain under pressure from global
fi nancial deleveraging for some time.
IFM: Is there a negative impact
to the move toward permanently
higher capital ratios?
Mr. Nechemia: The ongoing un-
certainty surrounding valuations of
what were once thought to be low-
risk assets has led to difficulties in
judging capital adequacy. Therefore,
capital buffers will need to be higher
than previously thought, eight per-
cent. Moreover, they should be based

on a forward-looking analysis of risk,
rather than a mechanical application
of regulatory ratios in the present.
To the extent that the move to per-
manently higher capital ratios is
mandated, the ratios should be
phased in and shall be increased
gradually and over an extended pe-
riod of time so that their attainment
does not amplify the existing cycli-
cal downturn of the real economy.
Though achieving higher levels will
further slow the restoration of normal
credit conditions, the process should
be under way by late 2009 in order to
put fi nancial institutions in a better
position to support the recovery.
IFM: What is your near-term
economic outlook?
Mr. Nechemia: Vigorous policy
action is needed in order to avoid a
serious global downturn. The author-
ities should concentrate their efforts
on achieving such an outcome, as the
emergence of substantial output gaps
in economies around the world would
leave a legacy of reduced output, lost
opportunities and sacrificed well-
being. The measures needed to avoid
this encompass both renewed efforts
The Chairman of the EurOrient Financial Group, Mr. Ron Nechemia during the interview with
International Finance Magazine, May 15th 2008, Beijing, The People’s Republic of China
International Financing
at stabilizing fi nancial systems, as
well as monetary and budget mea-
sures to support fi nal demand.
At the present, global fi nancial mar-
kets appear to have stepped back
from the brink in response to ag-
gressive policy support measures.
Nonetheless, the great danger of
renewed deterioration remains very
high in several markets, while fund-
ing and liquidity markets are still
severely strained. These negative
developments reflect deep shocks
that have undermined confidence
in fi nancial market counterpar-
ties, persistent concerns over future
losses and funding needs, and large
losses in bank and other institutions’
capital.
Restoration of fi nancial stability
would now benefit from a publicly-
stated collective commitment by the
authorities of the affected countries
to address the issue in a consistent
and coherent manner. However,
piecemeal interventions of the au-
thorities in their effort to address the
liquidity constraints and resolve the
troubled institutions will have very
limited to no succeed in restoring
market confidence, as they have not
addressed the widespread nature of
the underlying problems. The inten-
sifying worries about counterparty
risks have created a near lock-up of
global money markets.
In the broadest sense, the authorities’
principal tasks are to help reduce
the global economy’s systemic in-
stabilities and to promote effective
counter-cyclical policy action, as well
as to respond timely to both a struc-
tural and a cyclical changes.
Thus, fi nancial market deleveraging
is still underway, underpinning our
base case expectation of a substan-
tial and sustained slowdown in credit
growth through the coming year.
Moreover, fi nancial stresses have
spread to emerging markets, where
equity market downturns by now
have equaled or outstripped those
in advanced economy markets, and
where outflows from debt markets
threaten to reverse the structural
progress that has been one of the
most striking recent fi nancial mar-
ket developments.
Against the background of weak fi-
nancial markets, my forecast based
on current fi nancial and economic
policies is for global economic growth
to decelerate to maximum of two
percent in 2009, down from about
five percent last year. I’m also scal-
ing back my economic projections for
the recovery in 2010. While I believe
that the efforts to stabilize fi nancial
conditions and strengthen demand
support measures could still enable
a gradual recovery on or about June
of 2009, presently it seems that fur-
ther reduction to the growth forecast
is likely.
IFM: Do you see a substantial
slowdown in Asia due to the global
turmoil?
Mr. Nechemia: Asia is facing the
risk of a sharp slowdown as the
global economy enters a major down-
turn. Decisive actions are warranted
to maintain fi nancial stability and
support growth in the region, as
exports weaken and spillovers from
the global fi nancial turmoil weigh on
domestic activity.
2009 FEBRUARY ¦ 13
 COVER STORY
While the baseline scenario for Asia
sees recovery beginning in the sec-
ond half of 2009, risks to the outlook
are significantly larger than usual
and tilted to the downside. A deeper
and more protracted global slow-
down than currently anticipated,
combined with tighter international
fi nancial conditions from the ongo-
ing global deleveraging, could have
significant spillovers to the region
through both exports and a range
of fi nancial channels. It remains un-
clear how domestic demand in the
region would stand up to a sharp
decline in export growth and tighter
fi nancial conditions.
Despite Asia’s generally strong
fundamentals—including its sub-
stantial cushion in official reserves,
improved macroeconomic policy
frameworks and generally robust
corporate balance sheets and bank-
ing systems—the region is being
rattled by the crisis due to its close
trade and fi nancial integration with
14 ¦ 2009 FEBRUARY
the rest of the world. Any hope that
the region would escape the crisis
unscathed has by now evaporated.
IFM: Can we conclude this inter-
view with a brief summary?
Mr. Nechemia: In summary,
action across a range of areas is
needed to help the global economy
and fi nancial systems regain their
footing. With fi nancial markets
worldwide facing growing turmoil,
internationally coherent and deci-
sive policy measures will be required
to restore confidence in the global
fi nancial system. Failure to do so
could usher in a period in which
the ongoing deleveraging process
becomes increasingly disorderly and
costly for the real economy. Macro-
economic policies—especially fiscal
stimulus—should play an important
role in bolstering demand, while fi-
nancial sector policies continue to
be implemented and fi ne tuned as
needed.
The broad picture that I have sought
to develop here today is one where it
has been recognized at the highest
level of political authority that action
across a range of areas is needed
urgently to help the global economy
and the fi nancial system regain their
footing. An impressive consensus has
emerged about the reforms required
to redesign the fi nancial system,
and they are substantial. Macro-
economic policy action—especially
fiscal policy—is becoming increas-
ingly relevant and necessary for a
broad swath of countries. Financial
sector policy reforms also must con-
tinue to be implemented and fi ne
tuned as needed. And collectively,
we must work together to strengthen
the global fi nancial architecture in
a way that reduces future risks by
re-examining regulatory weakness-
es, forging ahead with new tools for
detecting vulnerabilities, and recog-
nizing the importance of fi nancial
integration and cross-border fi nanc-
ing in designing regulations and new
mechanisms for crisis prevention
and resolution. IFM
 COVER STORY
Mr. Ron Nechemia: A Devoted International Civil Servant
Mr. Ron Nechemia is a founding member of
the EurOrient Financial Group (“EurOrient”)
and its various affiliate development financial
institutions. He is not just a financial pioneer
but is considered the founding father of pri-
vate sector development banking. He is de-
veloping EurOrient into a full-fledged private
sector global development bank, as it evolves
from a mere project financier. Much to the
company’s credit, EurOrient is the world’s
first private sector global development fi-
nance institution and accredited institution
by the United Nations General Assembly on
Financing for Development.
During the talks with Mr. Nechemia, it is clear
that he is not only a professional financier,
but a unique scholar. He has frequently been
invited to consult and to deliver speeches in
Special High-Level Policy Dialog that reveals
his unique wealth of knowledge and global
vision on global financal architecture.Mr.
Nechemia contributes to High-Level Policy
Dialog address issues of “Aid effectiveness
and innovative financing for development.”
His observations touch upon the following
areas of concern to the international finance
community:
● Additional commitments concerning
innovative sources of financing for
development further debt relief and
International Public Goods;
● Better coordinated and more effective
aid at international levels as well as
implementation of the Monterrey Con-
sensus on Aid Effectiveness, including
more predictable aid mechanisms,
notably budget support, mitigation of
exogenous shocks, aid untying and
reform of the international financial
institutions.
Mr. Nechemia’s contribution and efforts to
the developing countries has earned him
many international awards and recognitions.
In 2002, as the State of California represen-
tative he joined the US Presidential Business
Commission; in 2003, he was selected as the
National Business Advisory Council Honor-
ary Chairman. Further, he is the recipient of
“Businessmen of the Year” award, an award
presented to top business leaders who cham-
pion the free enterprise system, and the “2003
National Leadership Award” presented by
the Vice President of the United States - Rich-
ard B. Cheney, as a recognition of outstand-
ing service and commitment, and in particular
for assistance and leadership in promoting a
pro-business agenda including tax reform and
fiscal responsibility. In 2004 he was one of
three nominees nominated by the Business
Advisory Councils for “Businessmen of the
Year,” an award representing the state of Cali-
16 ¦ 2009 FEBRUARY
fornia as one of the top U.S. business leaders
who has successfully integrated business and
financial success.
He has earned an international reputation as a
scholar, entrepreneur, political economist and
a political risk analyst specializing in country/
political risks in Asia, particularly in China.
He also regularly consults on issues such as
the assessment and mitigation of political and
economic risks for cross-border equity invest-
ment and debt financing transactions, and has
a broad range of transactional and regulatory
expertise focused on specific measures to de-
sign and enhance the creditworthiness and rat-
ing of venture.
In 2007, Mr. Nechemia contributed to the
book, “Inside the Minds: The Roles and Mo-
tivations of Key Players in a Venture Capital
Deal” co-authored with 7 managing direc-
tors and senior partners representing some of
the world’s top venture capital (“VC”) and
private equity firms, published by Aspatore
Books in the USA .
While many American companies are lay-
ing off employees, his company, EurOrient
Financial Group, is currently recruiting and
hiring new employees for its rapidly grow-
ing operation. EurOrient has owned a perfect
risk management system, so it has the strong
strength to continue the project development,
making new investments and recruit new em-
ployees. One of Mr. Ron Nechemia’s biggest
challenges is to identify top-level investment
talent to promote the developmental finance
activities. “EurOrient focuses its investment
and advisory activities in the complex and
evolving world of emerging markets and
economies in transition. This has required
that EurOrient pay particularly close atten-
tion to developing operational policies and
practices designed to manage high-risks and
to sustain success during times of crises and
high market volatilities. These policies and
practices are intended to ensure high quality
portfolio investments and loans for EurOrient
and for any funds managed by EurOrient.”
EurOrient’s investment and consultancy
activities focus on developing countries and
transitional economies while considering
variables such as credit risk, market risk,
currency risk, rate risk and political risk.
EurOrient is committed to paying disciplined
attention to the overall quality of its loan and
investment portfolio, and does so through its
best-practices approach in its investment and
lending activities of each project. In practice
this means that EurOrient analyzes invest-
ments from the ground up. Irrespective of
the overall economic climate, EurOrient will
not lend to or invest in a project that is not
itself economically viable or credit worthy.
EurOrient intends for its portfolio to consist
of uniformly sound investments.
EurOrient has continued its journey of devel-
opmental finance since being founded in 1988.
Under the leadership of Mr. Nechemia, his
vision has been to create a privately owned
global development bank. EurOrient’s share-
holding structure assures that the Company
will remain private sector oriented and that its
operations will remain free and independent
of any government’s foreign policy and po-
litical agenda. This independence will ensure
that EurOrient development assistance is ef-
ficiently and effectively managed, based on
good corporate governance and best practices,
for the benefit of its shareholders, investors,
and society at large. EurOrient affirms the of-
ten forgotten fact, that development must rep-
resent “...a transformation of society, a move-
ment from traditional relations, traditional
ways of thinking, traditional ways of dealing
with health and education, traditional meth-
ods of production, to more ‘modern’ ways.”
And that development “is not about charity; it
is about inclusion and empowerment, educa-
tion, good health, security, and opportunity.”
To EurOrient, development is about putting
people first, giving people a voice and better
life and respecting their fundamental human
rights. Because development is not about
charity, it is about delivering what people
want in a commercially viable, but socially
responsible manner.
Mr. Nechemia regards himself as an inter-
national civil servant. He devotes his life to
fighting poverty and disparity and to promot-
ing international cooperation and understand-
ing on behalf of the broader public good.
This article is a reproduction of the original Chinese
publication “International Financing” February 2009.